We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
How to Play Air Canada (ACDVF) Stock Ahead of Q1 Earnings
Read MoreHide Full Article
Air Canada (ACDVF - Free Report) , Canada’s leading airline, is set to report first-quarter 2024 results on Thursday, May 2. Some investors may be deliberating whether to purchase the stock before Thursday or wait for a better entry point.
Impressive Price Performance
Driven by the buoyant scenario with respect to air-travel demand, the stock has performed impressively on the bourse of late. The ACDVF stock has appreciated 21.8% over the past six months, handily topping its industry’s 15.2% growth.
Image Source: Zacks Investment Research
Strong Passenger Revenues Likely to Aid ACDVF’s Q1 Performance
The stronger-than-expected recovery of air-travel demand following the end of the pandemic has been driving airline stocks including Air Canada. While air-travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an encouraging comeback. With air-travel demand having improved, ACDVF is looking to add routes and broaden network. The carrier's debt-reduction efforts are impressive as well.
We expect upbeat air-travel demand, driven by healthy bookings, to have boosted the carrier’s top-line performance in the to-be-reported quarter. Passenger revenues, which account for the bulk of the top line, are likely to have been high, strengthening total revenues.
Not All Roses, Some Brickbats As well
Despite the above-mentioned positives, the ACDVF stock has its share of headwinds. An increase in oil price is not a welcome development for the company as fuel expenses represent a key input cost for any airline player. The northward movement in crude price is primarily due to the ongoing production cut by major oil-producing nations and geopolitical tensions. Notably, oil price increased 16% in first-quarter 2024.
The northward movement in expenses on labor are also hurting ACDVF’s bottom line by pushing up operating costs. This is likely to hurt first-quarter results. Labor costs are also likely to have been high in the March quarter due to elevated salaries, wages and benefits expenses following higher staffing levels.
Passenger service costs are also likely to have increased due to higher traffic and elevated selling costs. Inflationary woes are also likely to get reflected in ACDVF’s impending quarterly results.
Final Thoughts on ACDVF
In view of this write up, we can safely conclude that investors should refrain from rushing to buy ACDVF, which is facing quite a few challenges, before Thursday. Instead, they should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could adversely affect portfolio gains.
High Labor Costs: Bane for the Entire Industry
Air Canada, presently carrying a Zacks Rank #3 (Hold), is not the only airline suffering from high labor costs. Labor shortage and the corresponding buoyant air-travel demand in the post-COVID scenario have increased the bargaining power of most labor groups. As a result, high labor costs are prevalent throughout the industry.
For example, at JetBlue Airways (JBLU - Free Report) , non-fuel unit costs increased 7.1% in first-quarter 2024, mainly due to high labor costs. The metric is predicted to be up in the mid-to-high single-digit range (percentage-wise) in 2024 from 2023 levels. JBLU presently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
At Delta Air Lines (DAL - Free Report) , salaries and related costs increased 12% to $3.79 billion in first-quarter 2024. The increase was due to higher wages arising from the contract with pilots that was ratified last year. Mainly due to high labor costs, non-fuel unit costs at DAL are likely to increase 2% in second-quarter 2024. DAL, too, currently carries a Zacks Rank #3.
Image: Shutterstock
How to Play Air Canada (ACDVF) Stock Ahead of Q1 Earnings
Air Canada (ACDVF - Free Report) , Canada’s leading airline, is set to report first-quarter 2024 results on Thursday, May 2. Some investors may be deliberating whether to purchase the stock before Thursday or wait for a better entry point.
Impressive Price Performance
Driven by the buoyant scenario with respect to air-travel demand, the stock has performed impressively on the bourse of late. The ACDVF stock has appreciated 21.8% over the past six months, handily topping its industry’s 15.2% growth.
Image Source: Zacks Investment Research
Strong Passenger Revenues Likely to Aid ACDVF’s Q1 Performance
The stronger-than-expected recovery of air-travel demand following the end of the pandemic has been driving airline stocks including Air Canada. While air-travel demand is particularly strong on the leisure front, it is heartening to note that business demand has made an encouraging comeback. With air-travel demand having improved, ACDVF is looking to add routes and broaden network. The carrier's debt-reduction efforts are impressive as well.
We expect upbeat air-travel demand, driven by healthy bookings, to have boosted the carrier’s top-line performance in the to-be-reported quarter. Passenger revenues, which account for the bulk of the top line, are likely to have been high, strengthening total revenues.
Not All Roses, Some Brickbats As well
Despite the above-mentioned positives, the ACDVF stock has its share of headwinds. An increase in oil price is not a welcome development for the company as fuel expenses represent a key input cost for any airline player. The northward movement in crude price is primarily due to the ongoing production cut by major oil-producing nations and geopolitical tensions. Notably, oil price increased 16% in first-quarter 2024.
The northward movement in expenses on labor are also hurting ACDVF’s bottom line by pushing up operating costs. This is likely to hurt first-quarter results. Labor costs are also likely to have been high in the March quarter due to elevated salaries, wages and benefits expenses following higher staffing levels.
Passenger service costs are also likely to have increased due to higher traffic and elevated selling costs. Inflationary woes are also likely to get reflected in ACDVF’s impending quarterly results.
Final Thoughts on ACDVF
In view of this write up, we can safely conclude that investors should refrain from rushing to buy ACDVF, which is facing quite a few challenges, before Thursday. Instead, they should monitor the developments pertaining to the stock closely for a more appropriate entry point, as an erroneous and hasty decision could adversely affect portfolio gains.
High Labor Costs: Bane for the Entire Industry
Air Canada, presently carrying a Zacks Rank #3 (Hold), is not the only airline suffering from high labor costs. Labor shortage and the corresponding buoyant air-travel demand in the post-COVID scenario have increased the bargaining power of most labor groups. As a result, high labor costs are prevalent throughout the industry.
For example, at JetBlue Airways (JBLU - Free Report) , non-fuel unit costs increased 7.1% in first-quarter 2024, mainly due to high labor costs. The metric is predicted to be up in the mid-to-high single-digit range (percentage-wise) in 2024 from 2023 levels. JBLU presently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
At Delta Air Lines (DAL - Free Report) , salaries and related costs increased 12% to $3.79 billion in first-quarter 2024. The increase was due to higher wages arising from the contract with pilots that was ratified last year. Mainly due to high labor costs, non-fuel unit costs at DAL are likely to increase 2% in second-quarter 2024. DAL, too, currently carries a Zacks Rank #3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.